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Sustainable Investment Glossary



Thematic approaches

Definition: Thematic approaches consist in investing in companies actively involved in business sectors associated with sustainable development, such as renewable energies, water, healthcare or, from a more general standpoint, climate change and energy efficiency.

At LBP AM: La Banque Postale Asset Management favours this type of approach in its stronger conviction strategies via 9 sustainable investment themes: renewable energy, environmental services and services and solutions, sustainable transport and mobility, circular economy, sustainable agriculture and food, green buildings, health and well-being, support for SMEs-ISEs, and inclusive development. “ISR Actions Environnement” is a fund that adopts an SRI and Environmental approach, investing in companies that offer solutions to global energy transition problems. LBP AM ISR Green Bonds Flexible is a fund that invests in the Green Bond universe with a flexible SRI approach.

Transparency Code

Definition: The Transparency Code is mandatory for all SRI funds open to the public, managed by asset management companies belonging to the AFG or RIF. By adhering to this Code, asset managers undertake to answer the questions asked for each of the SRI funds under their management open to the general public.

At LBP AM: The Transparency Codes for SRI funds are available on the institutional website of La Banque Postale Asset Management.

ESG (Environmental, Social, Governance) criteria

Definition: Criteria used to assess the non-financial quality of issuers and companies. In general, they form the three pillars of non-financial analysis.

At LBP AM: In addition to ESG criteria, La Banque Postale Asset Management has constructed a proprietary GREaT philosophy, resting on four pillars Responsible Governance, sustainable Resource management, economic and Energy transition, and development of local/regional Territories.

Carbon Footprint

Definition: A carbon footprint is the quantity of carbon (generally measured in metric tons) emitted through the consumption of energy by a business, person, group or organisation. There are 3 scopes of emissions used to calculate carbon footprints:

  • Scope 1 : GHG (greenhouse gas) emissions related directly to the manufacturing of a product. For example, if oil is used or fuel burned to manufacture a product, or if the manufacturing process generates CO2 or methane emissions, all of these emissions are included in Scope 1. Scope 1 emissions are called direct emissions.
  • Scope 2 : GHG emissions related to the consumption of energy needed to manufacture a product. For example, to manufacture a product, electricity is generally used to power the factories where the product is made. The consumption of electricity does not, in itself, generate greenhouse gases. However, the production of electricity does emit greenhouse gases. All emissions related to secondary energy consumption are included in Scope 2. Emissions related to energy consumption are called indirect emissions.
  • Scope 3 : all other GHG emissions that are not directly related to the manufacturing of the product, but to other steps in the product life cycle (supply, transport, use, end of life, etc.). For example, it takes raw materials to make a product. The extraction of these raw materials, as well as their transformation and transport to the factory where the product is made, emit green house gases. Similarly, the end of a product’s life cycle, or its recycling, also emits greenhouse gases. These indirect emissions associated with the product life cycle are included in Scope 3. Scope 3 emissions are called other indirect emissions.

Shareholder engagement

Definition: Shareholder engagement is when investors use their rights as shareholders to encourage companies to make improvements in environmental, social and governance areas, via direct dialogue, by voting at General Meetings or by submitting resolutions when dialogue proves ineffective.

At LBP AM: La Banque Postale Asset Management actively exercises its voting rights at General Meetings by encouraging corporations to incorporate environmental and social criteria in their operations. LBP AM also places a high value on dialogue:

  • with companies: regular dialogue with an SRI objective, sometimes focused on Green Bonds or infrastructure private debt.
  • with stakeholders.

We have integrated ESG criteria in the selection of market service providers since 2010.

Companies offering “Solutions” to the Energy Transition

At LBP AM: Methodology developed since 2009: identification of companies generating at least 20% of their revenue in one or more of the six Energy Transition sectors identified by La Banque Postale Asset Management: renewable energy, environmental services and solutions, sustainable transport and mobility, circular economy, sustainable agriculture and food, and green buildings. This approach is applied in particular to LBP AM’s “ISR Actions Environnement” fund.

Normative exclusions

Definition: The aim of normative exclusions is to rule out investments in companies that fail to meet certain international standards or conventions (human rights, ILO Convention, Global Compact, etc.), or governments that have not ratified certain international treaties or conventions.

At LBP AM: La Banque Postale Asset Management has an Exclusion Committee whose purpose is to decide on regulatory, normative, sector and specific exclusions, and particular whether or not to exclude companies exposed to major controversies.

Regulatory exclusions

Definition: Controversial weapons (cluster bombs, antipersonnel mines, chemical weapons, biological weapons, etc.) are subject to international treaties (Ottaway, 1997, Oslo, 2008, etc.) which have been signed by France. Companies contributing to the creation or development of such weapons shall be excluded from investment portfolios.

At LBP AM: La Banque Postale Asset Management excludes companies involved in the manufacture and/or sale of controversial and unconventional weapons (anti-personnel mines, cluster bombs, and biological, chemical, nuclear, depleted-uranium, blinding and incendiary weapons) for all financial instruments issued (equities, bonds, money market instruments) and for all portfolios.

Sector exclusions

Definition: Sector (or ethical) exclusions are about excluding companies operating in business sectors considered harmful to society, such as alcohol, tobacco, weapons, gambling and pornography for ethical reasons, or GMOs, nuclear power, etc., for environmental reasons.

At LBP AM: La Banque Postale Asset Management also excludes controversial sectors such as gambling, tobacco and coal, in accordance with exclusion criteria specific to each sector.

Responsible Finance

Definition: Responsible Finance covers all practices aimed at reconciling economic performance and social, environmental or societal impacts. It can be differentiated from SRI in the sense that it goes beyond the investment itself, but also addresses all types of financing solutions (loans, project finance).

At LBP AM: Responsible Finance can take the form of SRI-certified funds meeting the general definition of the French Ministry for the Economy, i.e. which “integrate non-financial criteria in investment decisions and portfolio management”, in accordance with an engaging and meaningful approach

Solidarity Finance

Definition: Solidarity Finance is about investing savings in financial products serving the interests of society. In solidarity-oriented savings, investors are not just investing their money, they are making the deliberate choice to support projects with a clear social or environmental purpose: access to jobs or housing for persons in need, support for humanitarian or social causes. There are two types of solidarity savings products:

  • Solidarity investment products manifesting their solidarity through the amount invested: to qualify as a solidarity investment product, 5% to 10% of the fund’s capital must be allocated to solidarity financing solutions; the balance is invested in conventional financial markets, often in accordance with SRI criteria.

  • Shared-revenue products, which demonstrate solidarity in terms of revenues generated: to qualify as a solidarity investment product, at least 25% of the interest earned must be paid out as donations to an association.

Green Finance

Definition: Green Finance covers all financial transactions and operations whose purpose is to promote the energy transition and combat global warming. Green Finance falls into the category of Responsible Investment (RI), which is aimed at including compliance with environmental, social and governance (ESG) criteria in addition to purely financial criteria.

At LBP AM: LBP AM’s “ISR Actions Environnement” fund meets the definition of Green Finance, as do our investments in Green Bonds (e.g. the “Green Bonds Flexible” fund). These funds are certified by GREENFIN, the public certification issued by the Ecological and Solidarity Transition Ministry.

At LBP AM: LBP AM’s “ISR Actions Solidaire” fund supports solidarity-driven organisations conducting social inclusion or anti-exclusion projects, in which it invests 5-10% of its assets. The organisations in question are SIFA (Société d’Investissement France Active) and Habitat et Humanisme. LBP AM SRI Human Rights shares some of its annual income with the International Federation for Human Rights (“FIDH”).

SRI approach

Definition: “SRI (Socially Responsible Investment) is an investment aimed at reconciling economic performance with social and environmental impacts by financing companies and public-sector entities that contribute to sustainable development regardless of their business sector. By influencing the governance and behaviour of corporations and government authorities, SRI helps bring about a responsible economy.” (AFG definition)

At LBP AM: La Banque Postale Asset Management has adopted a portfolio management classification system in line with AFG recommendations.

  • “Label ISR” certified funds: scope of certifiable open-ended funds, as “Label ISR” rules do not yet cover all asset classes and fund types.
  • SRI funds: engaging and meaningful incorporation of non-financial criteria
  • Responsible Investment funds: incorporation of non-financial criteria in investment decisions.

Impact Investing

Definition: Impact Investing is a form of investment in companies or organisations aimed at generating a positive environmental or social impact in addition to a solid financial performance. The impact generated by such investments has to be intentional, measurable and additional, meaning the impact being measured would not be possible without the investment being made. In France, Impact Investing includes the well-established concept of “solidarity finance”, which is about investing in companies in the solidarity economy (social inclusion through employment, organic agriculture, prevention of inadequate housing, etc.).

At LBP AM: La Banque Postale Asset Management practices Impact Investing through its solidarity funds, Green Bond funds and Private Debt strategies.

Carbon Intensity

Definition: Metric tons of CO2 (tCO2) equivalent per million euros of revenue

At LBP AM: For each of its thematic funds, LBP AM discloses the carbon intensity of the fund and the benchmark index in the monthly report.

Transition bonds 

Definition: A Transition Bond is used to fund projects generating an environmental impact, but not meeting the strict eligibility criteria for qualification as “green projects” for the purpose of issuing Green Bonds. Transition Bonds thus serve to bridge the gap between projects eligible for Green Bond issues and those that are not.

At LBP AM: La Banque Postale Asset Management especially appreciates how these instruments are structured, calling for a certain level of transparency in terms of impact thanks to the earmarking of funds and demanding level of reporting, coupled with the issuer’s commitment to the transition.

Sustainability Bonds 

Definition: Sustainability Bonds offer all the features of a debt security. They are issued, however, in the interest of financing one or more new/existing projects or projects in development that are identifiable and classified as “sustainability” projects.

Sustainability projects are defined by their positive contribution to a sustainable development goal. Although the majority of projects involve funding for the energy transition, the general term “Sustainability Bonds” includes categories of securities serving various environmental or social purposes such as Green Bonds, Climate Bonds, Social Bonds, Vaccine Bonds, etc.

At LBP AM: As a 100% Responsible investor, La Banque Postale Asset Management plans to work to promote the expansion of the sustainability bond market not only through its investments, but also by undertaking to promote transparent and efficient practices. La Banque Postale Asset Management has employed a tried and tested methodology for analysing Green Bonds since 2013, which also covers the sustainability bond market.

SDG Bonds 

Definition: Bonds with the goal of compensating for the lack of funding for the 17 Sustainable Development Goals (SDGs), targeted for completion by 2030.

At LBP AM: LBP AM has employed a tried and tested methodology for analysing Green Bonds since 2013, which also covers SDG bonds.

Social Bonds

Definition: Through the Social Bond Principles, the International Capital Market Association (ICMA) defines Social Bonds as bonds financing projects that “directly aim to address or mitigate a specific social issue and/or seek to achieve positive social outcomes especially but not exclusively for a target population(s).”

At LBP AM: La Banque Postale Asset Management has employed a tried and tested methodology for analysing Green Bonds since 2013, which also covers social bonds.

Green Bonds 

Definition: Green Bonds are an innovative financing tool used to fund projects aimed at promoting sustainable environmental development. Issuers are diversified: international institutions, supranational agencies, governments, local authorities, banks, corporates

At LBP AM: In 2013, we established a proprietary analysis framework specially dedicated to Green Bonds. These instruments are clearly identified and monitored in our portfolio management tools. This approach is applied to LBP AM’s “Green Bonds Flexible” fund and to other bond funds.

Corporate Social Responsibility (CSR)

Definition: Corporate Social Responsibility is the implementation of sustainable development practices by business organisations. Accordingly, a company that exercises CSR seeks to have a positive impact on society, respect the environment and integrate sustainable development criteria in its governance while remaining economically viable. This balance is obtained with the help of its stakeholders, i.e. its employees, clients, providers, shareholders and regional parties.

At LBP AM: La Banque Postale Asset Management is a responsible company that is highly attentive to its stakeholders and its impacts. CSR (Corporate Social Responsibility) is an integral part of our strategy, both in how we manage our company and how we conduct our asset management business. We have deployed our CSR policy in the five key areas deemed strategic for our industry, and which reflect our proprietary GREaT philosophy:

  • Responsible governance: getting involved at the highest level of management
  •  Social responsibility: sharing a unique culture
  • SRI: being a responsible investor
  • Societal and regional engagement: taking action to foster a fair and inclusive society
  • Environmental engagement: making a targeted effort to promote sustainable development

SRI strategies

Definition: SRI strategies can take several different forms:

  • Best-in-class: selection of the best issuers in their business sector, without excluding or prioritising any given field of activity.
  • Best-in-universe: selection of the best issuers, irrespective of their business sector, which may call for excluding sectors in which all companies are poorly rated, or conversely prioritising sectors that, on average, comprise companies implementing best ESG practices.
  • Best effort or weighting: prioritising issuers that demonstrate an improvement in their ESG practices over time

At LBP AM: For its funds and mandates, La Banque Postale Asset Management proposes SRI strategies founded on its proprietary GREaT philosophy.


Range of approaches and impact investing process

Spectre des approches et des démarches d'impact

Certifications & Awards

Certifications


SRI public

Launched in 2016, this certification indicates that the certified fund meets a specific set of specifications, including financial management, ESG (Environmental, Social and Governance) criteria, requiring not only transparency and quality in terms of Socially Responsible Investment but also requiring funds to disclose the concrete impact of their Socially Responsible Investment on the environment or society, for example.


Greenfin

In June 2019, the Ecological and Solidarity Transition Ministry created the Greenfin certification to mobilise savings in favour of the energy and ecological transition. Greenfin replaced the “Label TEEC”.


Finansol

An award that has recognised solidarity savings investments since 1997. It guarantees funding for activities with a clear social purpose and attests to the financial intermediary’s commitment to provide reliable information on the certified investment and financed activities.

Awards received

Climetrics: 3 funds

> LBP AM ISR Actions Euro
> LBP AM ISR Actions Europe
> LBP AM ISR Actions Environnement

Developed by the Carbon Disclosure Project (CDP) and ISSEthix Climate Solutions, Climetrics is the first rating method to provide a comprehensive assessment of a fund’s climate-related risks and opportunities. Climetrics independently and transparently assesses thousands of funds actively managed in Europe.